I am still undecided about my stop orders. Should I use hard stops or mental stops? My stops are usually 4 to 12 ticks. Yesterday I abandoned my mental stop of 6 ticks and let the market go against me 30 ticks. I cannot let this happen again.

For hard stops
-less stress
-guarenteed exit price
-insurance in case of news


For mental stops
-sit through adverse price spikes that may trigger a hard stop
-very easily changed(an argument for and against mental stops)

I think it's usually not a great idea to give advice, since everyone is different and will trade differently. But with that said, I have never known "mental stops" to do me any good at all. When price comes back toward a stop (real or "mental"), my usual reaction is to hope it isn't hit.. Why? because if it is, and if it's a real ("hard") stop, I'm out and there's no more possibility price will turn around and make me right after all. (It may turn around, but without me in it.)

The difference is that, if I have a real stop (meaning, it's actually going to stop something because there's an order already in), then I am actually going to be out and cannot do more rationalizing. If it's a "mental" stop (meaning, it just depends on my very low level of personal discipline and self-honesty), then I can procrastinate and rationalize and fool myself for a very long time before the loss gets large enough that I actually must do something.

It is also very common that price will pull back only enough to hit my stop, which makes me prone to paranoid fantasies about "Them" being out to get me, or makes me think that actual stops that are in the market are dangerous, or any other line of thnking that makes me want to give them up. (I almost never think that I put my stops in just about the same place that everyone else has put theirs, making it a big fat target, or that I shouldn't care about it being hit, because If I'm out I am not still losing.)

I'm not making fun of you. Every one of these thoughts are mine, and I have them very often still. I have them because trading does this, it makes me not able to think too clearly in the exact moment when I most need to, when I am facing a loss and need all my rationality to help me.... but my rationality has often jumped ship about that point, and I'm left with whatever else I have.

Maybe this doesn't apply to you. I know there are good traders who never put "hard" (that is, actual) stops in, and they can manage the task of deciding whether to bail out without needing them. I also know that stops can kick you out of a move that does turn in your favor, and I don't really have a cure for that, other than trying to take better trades. (There are a lot of other reasons for wanting that, too. )

So if this doesn't help you in deciding what to do about stops, if may be that it doesn't really apply to you, and I'll say "sorry for taking up your time."

But when you say things like you hold a losing trade hoping it will turn around and make you not lose, I think maybe your mind works like mine. Stops that are actually in, and "hard" (and that I don't change to avoid their being hit), keep me closer mentally to the way I need to be while trading. Maybe they will help you too.

Bob.

Hi from the "For what it's worth" Dept.

I use hard stops mostly because the internet isn't guaranteed and my stops reside on the trade server so I'm covered and it has happened a few times.

The other note I'll make is I'll sometimes use a bit wider stop than normal, 12-16 ticks vs 8. This helps with pressure of the inevitable back and forth of the ES. I know I'm protected but also not as tense when it's getting close. I've rarely let it get hit and many times it's allowed me to see what's going on, realize I was wrong and get out early. And it's always OK to tighten if you're right.

Hey Tripken, yeah I am good about tightening my stops when the price goes into a profit for me. If I have an 8 tick stop in and the market goes 20 ticks in my favor I will move that stop to break even and keep it there. I would definitely like to build the discipline to have a stop in and actually get out before the stop gets hit like you said. That is something I will also work on. I have gone over my trade journal and I would be a lot closer to being profitable if I could eliminate the large losses that plague me. Like I said I just change or eliminate my stop a lot, especially in trading the MES because the market has a reaction in the opposite direction most of the time and I think it will come back to my break even. This practice has led to many large losses that keep my profits low.

Have you considered trailing stops? Trail a 8 tick stop and leave the trade alone until it is triggered? That way you cut losers quickly and let the winners run.

That is a good idea. Would solve a couple of my issues. I worry that my winners wouldn't have enough wiggle room if it was trailed so tight. That might be a whole other topic to discuss.

My revised trading rules

1. Use a stop order and don't break it
2. Don't run out of money